Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

C Corporations are subject to what type of taxation?

1. Single Taxation

2. Flat Taxation

3. Double Taxation

4. No Taxation

The correct answer is: Double Taxation

C Corporations are subject to double taxation, which means that the corporation itself must pay taxes on its profits at the corporate tax rate. When these profits are distributed to shareholders as dividends, the shareholders are then required to pay taxes on the income they receive from those dividends. This results in the same income being taxed twice: once at the corporate level and again at the individual level when distributed to the shareholders. This taxation structure is a key characteristic of C Corporations and distinguishes them from other business entities, such as S Corporations or sole proprietorships, which typically face different taxation models.